Holding Cash Is Not Weakness But Strength At This Stage Of the Global Bull Market

Many bulls in the investment community have simply thwarted the idea of owning cash in recent years. Such a strategy has worked wonders for investors who have held onto positions as stock valuations have continued to soar, but increasing concern among many conservative long-term investors such as myself has begun to pop up as valuation multiples approach levels not seen since the dot-com boom and the Great Depression.

The idea that valuation multiples could continue to rise indefinitely is not one most finance folks believe is realistic, although some investors seem to be buying into the idea that this bull market may have a significant amount of room to run. I’m of the opinion that at this point in time cash should remain a significant holding (if not the most significant holding) of every investor’s portfolio. Take a look at some of the most iconic investors of all time (Warren Buffett) and some of the most successful companies of all time (Apple Inc.) and the importance of having cash available in today’s world has increased substantially.

In a recent article, I discussed the value of owning guaranteed investment certificates (GICs) as a way of holding cash in an inflation-protected manner. For investors worried about cash holdings being eaten away by inflation over time (a reasonable concern), I would suggest short term GICs as an option for investors looking to hold liquidity while escaping the jaws of inflation.